Central Bank of Kuwait (CBK) issues new instructions regulating electronic payments of funds

The Central Bank of Kuwait (CBK) has recently made a significant announcement regarding the issuance of updated instructions for regulating electronic payment of funds. These instructions, which were initially introduced in 2018, have undergone meticulous revisions and improvements. In early 2022, a draft version was made available for public review, followed by a series of consultations with stakeholders.

The CBK emphasized that these instructions lay down mandatory requirements that both existing and new financial firms must adhere to. Whether engaging in electronic payment activities, offering electronic money services, or operating electronic payment systems, financial institutions must meet the stringent criteria outlined in the instructions.

One significant development is the CBK's inclusion of regulations specifically governing Buy Now Pay Later services. This move opens doors for Kuwait-based businesses, particularly online retailers and e-commerce platforms, to offer products on Buy Now Pay Later terms to Kuwaiti consumers. This innovation provides more options and flexibility for consumers, enhancing their purchasing power and offering greater convenience.

Of particular note is the evolution in licensing regulations for e-payment service providers. Under the previous CBK regulations, only large shareholding companies licensed by the CBK for lending or currency exchange activities were eligible to be independently licensed as e-payment service providers. Small and medium enterprises were restricted to acting as agents of these larger companies. However, the CBK has now repealed this limitation, granting more independence and opportunities for start-ups. This change provides greater flexibility for start-ups to obtain the necessary licenses and operate autonomously.

The new regulations also place a strong emphasis on reinforcing the regulatory framework in various key areas. Corporate governance, risk management, anti-money laundering and terrorist financing measures, cyber security protocols, business continuity plans, consumer protection mechanisms, and data privacy safeguards have all been strengthened under the CBK's revised regulatory framework. These measures aim to enhance the integrity, security, and trustworthiness of electronic payment systems in Kuwait, promoting a safe and reliable environment for financial transactions.

By introducing these new regulations, the Central Bank of Kuwait demonstrates its commitment to fostering an innovative and inclusive financial ecosystem. The regulations create opportunities for businesses to offer diverse payment options to consumers, while simultaneously ensuring that robust regulatory standards are in place to safeguard the interests of all stakeholders. As Kuwait's financial landscape continues to evolve, these regulations play a pivotal role in shaping the future of electronic payments and empowering both established enterprises and start-ups to thrive in the digital economy.

Article written by Nour Audi , Associate.

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